Last week I found these graphs which mapped the fluctuations of the Dow against approval ratings for the last six US presidents. In short: The two had almost nothing to do with each other. That's a little surprising, inasmuch as Americans allegedly vote on the economy, but when you think about it, the Dow isn't the most immediate indicator of economic strength. If anything, it's a leading indicator because its value represents what investors expect in the coming months, or years. But when it comes to voting (or approval in a poll) Americans will probably turn to something more immediate and tangible, like unemployment or inflation.
Like gasoline prices!
Barry Ritholtz pointed me to his new piece
that looks at the relationship between gasoline prices and President
George W. Bush's approval rating. In case you can't read the small
font, Bush's approval index is in red and the reciprocal gasoline index
is in blue (so a downward drop means more expensive gas.) Now this is
more like it:
I should repeat the oft-repeated refrain that correlation is not causation. And indeed, you could easily explain this graph in a way that made this correlation seem completely incidental.
1) Exploding worldwide demand helped drive up energy prices throughout the 2000s. Of course they went up.
2) Independently, and simultaneously, President Bush went from astronomical post-9/11 approval ratings (that weren't sustainable even if he were the second coming of Abe Lincoln) through a series of setbacks, from the Middle East quagmire to Katrina to internal scandals and more. Of course it went down.
So gas prices didn't help Bush's rating, but it was just one of many anchors tied to a sinking rock.
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